U.S. home prices fell 4.5 percent in the third quarter from a year earlier, the sharpest drop since Standard & Poor’s began its nationwide housing index in 1987 and another sign that the housing slump is far from over, the research group said Tuesday.
 
One of the index’s creators also predicted that there’s a significant chance of a recession as the economy contends with falling housing prices, spiking foreclosures and turmoil in the financial markets.

“Over 50 percent,” said MacroMarkets LLC Chief Economist Robert Shiller, giving his odds for a recession. Other economists have put the chance of recession at one in three.

“We’re in the aftermath of the biggest housing boom in history, so how do we use historical data to judge the outcome?” he said. “We’re out of the range of the normal variation in the data and I take that as very significant.”

Yeah, no SH#@ you are out of the normal variation in the data. This is the biggest financial bubble in the history of the earth. Everything was normal when you idiots were bidding up the price on a one bedroom cape cod that should not have sold for more than three times a persons annual salary, but now when things are returning to normal there must be something wrong!

This issue goes far beyond the housing prices, this is just the beginning. I here allot of people trying to explain what kind of mess we are in but they just don’t seem to explain it right or should I say simple enough for the average American dumb-ass. That is what I will try and do.

In the past when you needed a loan for a house you went to your local bank and asked for a loan. Then they would either approve or deny you. If they approved you, they would loan you the money of the other local residents that had money in the local bank. Your neighbors money. They would charge you say 10% on the loan and pay the other local residents a percentage for loaning the bank the money in deposits. OK, good, sounds right.

In the past ten years Americans stopped saving, so the banks had no money to loan people for loans. They came up with an idea. Let’s approve the loans and package them all up and sell them to wall-street, like a bond, which is just a loan. These bundles of loans were rate as triple AAA, that means something as good as gold, the value never goes down.  The hedge funds and other institutions bought these bonds thinking they will never lose value. Say they bought 1 million dollars worth of these bundled loans, then they wanted to buy 2 million dollars of something else, like stock. So they need a loan. They ask a bank to give them 2 million dollars to buy this new stock. The bank says where is your collateral, they say here, I have 1 million dollars worth of these bundled up loans which are rated triple AAA. The bank goes ok, great, if I need my 2 million I am loaning you  back, you can always cash in these bundled loans that are worth 1 million dollars and that never lose value.

Well, guess what, the bank wants their 2 million dollars they borrowed and they are trying to cash in these loans that are supposed to never lose value and they can’t get what they paid for them and there are a trillion dollars worth of this garbage out there.

So the base was built on sand and we are just beginning to tip over. This should be very interesting. This is going to have ripples around the whole world. Recession? We should be so lucky!